Get Rich Quick
From 1970s Florida to Ocean Shores in 2008, scamming home buyers is nothing new
By Christy Denny |
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Sam Covington was unemployed, middle-aged, and trying to support a family. While attending
a conference hosted by the American Gulf Corporation, a real estate company founded by
Leonard and Jack Rosen, Sam saw brochures of beautiful land in Florida. For a bargain price,
this land could be his. He could forget his embarrassing job situation by staking his claim
in paradise. Without seeing it in person, Sam bought some land, which he passed down to his
son, Dennis.
In his memoir Redneck Riviera: Armadillos, Outlaws, and the Demise of an American Dream,
Dennis describes the first trip he made to visit “paradise.” He saw firsthand that the land
was a swamp—nothing at all like those brochures.
Throughout the ’60s and ’70s, the Rosens and their company knowingly sold undeveloped
land to 16,000 buyers, all of whom thought they were investing in gorgeous estates.
The Florida land fraud grew much faster than the government could regulate it. In 1963,
the states of Florida, California, and New York passed legislation in an unsuccessful attempt
to halt the practice. Five years later, Congress passed the Interstate Land Sales Full
Disclosure Act, but land schemes persisted; for example, the American Gulf Corporation
stayed in business until 1975.
Though the Florida land scheme fraud is the one David Mamet chooses to feature in the plot
of Glengarry Glen Ross, the Rosens (and many others) who unethically and illegally
profited off of Florida swampland are just a handful of the schemers dotted throughout American
history who used real estate fraud to get rich quick.
Case in point, our own state of Washington fell victim to land scheme frauds just within the
past few years. In April 2008, Michael Rich was sentenced to 20 years in prison and ordered to
pay over $10 million in restitution after investigators discovered his real estate Ponzi scheme.
As CEO of Pac Equities, Rich swindled $18 million out of more than 300 investors. He falsely
claimed to be managing profitable development projects, ranging from a Phoenix subdivision to
townhouses in Salem, OR. Closer to home, Rich even claimed to own commercial buildings in Redmond,
WA, and a resort in Ocean Shores, WA.
To investors, Rich promised annual returns of ten percent or more, paid on a monthly basis,
and guaranteed the investments were secured by trust deeds. In reality, Rich was lying not only
about the nature and security of the contracts, but also about his educational background and
employment history.
In a classic Ponzi scheme. Rich was using the money from new investors to pay earlier investors.
The only sources of income for Pac Equities were a few projects and loans which the U.S. Attorney’s
Office found to be insufficient to meet the monthly obligations owed to investors.
All in all, Rich was found guilty of securities fraud, wire fraud, mail fraud, bank fraud,
attempted bank fraud, money laundering, obstruction of justice, and tax fraud.
The details differ—the land and people involved were on different coasts, and separated
by over 30 years. But the general outlines of these cases are exactly the same, and in each case
we wonder how this could have happened. As we enter the second decade of the 21st century, we still
struggle with how to control the driving force between both cases have in common: greed.
Christy Denny is the Assistant to the Director for Glengarry Glen Ross.
